Legal and Tax Matters for U.S. Expatriates and Travelers

Offshore Account Voluntary Disclosure Ends this Month

2011-08-18T09:23:00.002+02:00

The IRS's 2011 Offshore Voluntary Disclosure Initiative (OVDI) will expire on Aug. 31, 2011. Taxpayers who come forward voluntarily get a better deal than those who wait for the IRS to find their undisclosed accounts and income. New foreign account reporting requirements are being phased in over the next few years, making it ever tougher to hide income offshore. The IRS continues its focus on banks and bankers worldwide that assist U.S. taxpayers with hiding assets overseas.

According to the IRS website, “The time has come to get back into compliance with the U.S. tax system, because the risks of hiding money offshore keeps going up,” said IRS Commissioner Doug Shulman. “Our goal is to get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems.”

The 2011 initiative offers benefits to encourage taxpayers to come forward rather than risk detection by the IRS. Taxpayers hiding assets offshore who do not come forward will face far higher penalties along with potential criminal charges.

For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period.

Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. All original and amended tax returns must be filed by the deadline.

The IRS has made available the 2011 OVDI information in eight foreign languages for those taxpayers with undisclosed offshore accounts.

IRS Disclosure Deadline for Offshore Accounts

2009-09-09T23:47:00.004+02:00

Many, if not most, US expatriates have bank accounts or other financial accounts in the countries where they live. The IRS calls these "offshore accounts", not because they are in exotic places like the Cayman Islands, but merely because they are not in the United States. Readers of this blog know that these accounts need to be reported to the US Department of Treasury every year.

Of course not every one follows the law or even knows what the law requires so it may well be that some of you have not properly reported these accounts. The IRS, in its efforts to crack down on the use of offshore accounts for tax evasion, has offered to let those taxpayers who have not reported these accounts or the income from them to avoid some penalties and criminal charges if they file a voluntary disclosure by or before September 23, 2009.

he IRS Commissioner’s full statement dated March 26, 2009 an be found here:http://www.irs.gov/newsroom/article/0,,id=206014,00.html

If you have trouble sleeping . . .

2009-05-26T14:48:00.002+02:00

You might want to check out this Department of Treasury website:

http://www.treas.gov/offices/tax-policy/treaties.shtml

The site gives the full text of all so-called "double taxation" agreements that the United States has entered into with other countries. These treaties form the basis of some of the favorable tax treatment that US expatriates can enjoy, as well helping US expatriates avoid the possible penalty of double taxation (which is the primary purpose of these types of treaties). As a lawyer, I would not suggest trying to interpret or implement the provisions by yourself, but a basic understanding of what these treaties govern can go a long way toward helping you plan for the tax implications of your personal and business activities and make your work with your own tax advisor more productive and efficient.

Important tax dates for U.S. expatriates

2009-03-07T15:41:00.003+01:00

June 15, 2009

Anyone growing up in the United States has "April 15th" embossed in his or her memory as "tax day." Most of us probably remember news reports from outside US post offices at midnight, April 15th, showing crowds lined up to get the April 15th postmark on their tax returns. Fortunately (especially since it is already the end of May), the April 15 deadline is not so important to US expatriates. If you live outside the United States AND your main place of business is outside the United States, or you are in military service outside the United States, you have an extra two months to file your federal tax return and pay your tax. This means, in most cases, your return is due no later than June 15th. Be careful in your planning, however, because the extension of time to file and pay does not extend to interest payments. So, if you owe a lot of tax, and don't pay it by the normal due date (usually April 15th), the IRS will charge interest on the tax due until you pay it.

June 30, 2009

This is the due date to file Form TD F 90-22.1 with the Department of Treasury to report any and all foreign bank accounts or foreign financial accounts. You only need to file if the total amount of all accounts is over $10,000. The form, with its somewhat complicated numbering, seems to be an unimportant administrative burden, but don't be fooled. This is the form the owners of those accounts in Switzerland (uncovered during the investigation of UBS) wish they had properly filled out so they would not be embarrassed (or worse) when the government asks them about an account they "forgot" they had. This is also the form that will be getting lots more scrutiny under President Obama's initiatives to close overseas tax loopholes. So, please remember the date and please fill out the form fully and completely.

If you have a Green Card . . .

2008-03-07T10:54:00.000+01:00

. . . you should be aware that the U.S. Citizenship and Immigration Services (USCIS) has issued revised instructions for USCIS Form I-131, Application for Travel Document (re-entry permit) that requires a new procedure for collecting biometric data on travelers.

The new instructions for Form I-131 require that applicants for re-entry permits who are ages 14 through 79 provide biometrics (fingerprints and photographs) at an Application Support Center (ACS) before departing from the United States. Applicants also are strongly encouraged to apply, whenever possible, well in advance of their anticipated travel dates to allow time to attend their ASC appointments and to receive their travel documents. Shortly after filing an I-131 form for a Re-entry Permit, USCIS will mail the applicant his or her receipt and an ASC scheduling notice. The Form I-131 instructions also provide guidance for certain persons who are abroad at the time of filing to visit a U.S. Embassy or consulate for fingerprinting, although all applicants are urged to file before leaving the United States.
The instructions also discuss the requirement for applicants for re-entry permits who are in the United States to pay the $80 biometrics services fee, or to submit a biometrics fee waiver request with sufficient documentation to support their inability to pay the fee. As in the past, the application fee for the I-131 form cannot be waived.
Obtaining a re-entry permit before traveling abroad for an extended stay is something many Green Card holders forget, and most of the time the border inspector is fairly lenient with returning permanent residents. But, the law is clear that if a Green Card holder leaves the United States for anything other than a temporary purpose, he or she loses permanent resident status automatically. This means that when the Green Card holder attempts to return to the U.S. he or she can be detained at the port of entry and held pending a determination of abandonment by an immigration judge and then denied entry. The leading administrative case on this subject is Matter of Kane (15 I&N 258, BIA 1975). That case involved a Green Card holder who lived 11 months out of each year in Jamaica, where she ran a boarding house, and then returned to the United States for one month, where she rented a room by the week. The Board of Immigration Appeals held that the Green Card holder had abandoned her residence in the U.S. and was no longer entitled to enter as an immigrant.

Filing Form I-131, in which you set forth the temporary nature of the visit abroad, before traveling reduces considerably the risk of having re-entry problems.

A boon to travelers? Or an invasion of privacy?

2008-03-04T10:50:00.000+01:00

Imagine landing at international Terminal 5 at ORD, walking at a comfortable pace through the long corridors, picking up your luggage at baggage claim, and walking out to your waiting taxi, all with just a wave and smile to the U.S. border inspectors. A dream? Well, at the moment this is still a dream, but the U.S. government is working hard to make it a reality. The U.S. State Department has been issuing electronic passports since 2006. The passports contain a tiny radio frequency identification (RFID) chip which can automatically transfer biometric and other information to the border inspector without the need for manual entry. This speeds up processing at the border, but is still a long way from the scenario I am waiting for.

Now, since February 1, 2008, the U.S. State Department has been accepting advance applications for the new Passport Card (also called the PASS Card). The new card will contain a different type of RFID chip than the e-Passport and will be used at 39 specially designated land border points of entry that will have RFID lanes. The PASS Card toting traveler will still not be able to saunter alone over the border, but the RFID chip will send out a information that will be received by the border inspector a few minutes before the traveler arrives at the checkpoint. When the traveler steps up to the counter, the border inspector will already have the data on his or her computer screen and can then admit or deny entry as appropriate.

The new PASS Cards are controversial. 4000 comments were received regarding the proposed rule. Among those submitting comments were: four Members of Congress, Senators Hillary Clinton and Charles Schumer of New York, Senator Patrick Leahy of Vermont, and Representative Louise Slaughter of New York; the governments of Canada and two of its provinces (Manitoba and New Brunswick); a Native American government (Haudenosaunee Confederation, New York); and dozens of city, county, and municipal governments. Also represented are the United States Postal Service (USPS), the Air Transport Association, over two dozen technology companies and privacy interest groups, five tourism interest groups, and three offshore drilling concerns.

The vast majority of the comments were generated from an e-petition launched by Citizens Against Government Waste opposing the choice of technology. Independent of the e-petition, an additional 28 comments were received regarding technology. In addition, over 150 comments voiced opposition to the change in the amount of the passport execution fee. Other key topics included security issues (21), privacy issues (18), and potential negative economic implications, including a decrease in tourism on both sides of the border (14). Only a small number of comments opposed the idea of the passport card itself, and over 20 comments specifically voiced support for the passport card.

The concerns about the technology are tied to privacy issues. The e-Passport technology is “proximity read” technology that can only be read at the counter. The PASS Card is “vicinity read” technology that can be read over a distance of perhaps 20-30 feet. Critics say that the new chip being used in PASS Card is not secure enough and that hackers close to the border will be able to access the information. The U.S. State Department has countered by saying that no personal information will be transferred. Instead the chip will send out a unique ID number that will allow the border inspector to access the traveler’s personal information in the U.S. government database.

For expatriates, the new PASS Card will only be interesting if you live in Canada, Mexico, the Caribbean, and Bermuda and commute to the United States often by land or sea. The PASS Card cannot be used for air travel.

Link to information on the US Passport Card http://www.travel.state.gov/passport/ppt_card/ppt_card_3926.html

Link to information on the US Electronic Passport

http://www.state.gov/r/pa/prs/ps/2006/70433.htm